Investing in Uruguay Cannabis with International Cannabis Corporation (TSX-V: ICC)
This Public Company Sells Marijuana to the Government
Her name was Lucia.
I met her while spending six weeks in Mexico back in 1991.
I was attending an intensive Spanish language program there, and she was a hired peer counselor for the summer.
Born and raised in Salto, Uruguay, Lucia had a passion for languages. She was multilingual, speaking everything from English to Serbo-Croatian.
She eventually became a translator for a high-end New York law firm, spending most of her time working with Russian and Chinese clients. But to this day, she still calls Uruguay “home.”
In fact, every year she goes back to her hometown for two months in December and January. And every year, she invites me to come visit her.
I may actually take her up on it this year.
Uruguay = Opportunity
A few weeks ago, Lucia emailed me to tell me about the new cannabis museum that just opened up in the Uruguayan capital of Montevideo.
The museum's focus is to illustrate the history and multiple uses of cannabis.
She thought that, as a cannabis legalization advocate and investor, I might find this interesting. And she was right. But not nearly as interesting as I find the potential cannabis investment opportunities in this beautiful country of 3.4 million people.
You see, back in 2013, Uruguay became the first country in the world to legalize and regulate cannabis.
Of course, the rollout of those regulations have come at a snail’s pace. Still, today, private citizens can grow up to six plants at home, and if you wish to grow more, you can join a cannabis club where folks join forces to produce a lot more — for personal use, not for sale.
Legal sales through pharmacies have also been on the path to regulation and were actually supposed to begin this past summer. That has since been pushed back until 2017. This is unlikely to get pushed back any further, however, as the government has officially opened up registry for pharmacy sales.
Truth is, 2017 could be a very big year for the Uruguayan cannabis industry. And certainly, we’re always looking to add to our exposure to the cannabis space when possible. This is an opportunity to do just that.
Uruguay is the Place to Be
Uruguay is actually a pretty secure country in South America.
It has a small but stable economy. It's regionally high in per-capita income, boasts low unemployment, and has virtually no extreme poverty.
Uruguay also ranks high in measures of economic freedom, human development, standard of living, and institutional stability. It has the largest middle class and lowest levels of corruption in the region, too.
It’s also worth noting that during the 2008 global economic implosion, Uruguay was the only South American nation that avoided a full-blown recession.
All in all, when looking at investment opportunities, Uruguay is not a bad place to be. And since it was the first country in South America to legalize cannabis, it’s also about to enjoy some serious first-mover advantage on a continent that is starting to see the erosion of cannabis prohibition.
The fact is, much of South America is now experiencing early indications of industry growth thanks to shifts in public attitude, a better understanding of the medical benefits of cannabis, and legislative agendas that seek to curtail drug violence by initiating legalization policies.
Of course, right now, if you’re looking to get an early piece of the cannabis industry in South America, the focus should be on Uruguay.
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International Cannabis Corporation (TSX-V: ICC)
While the opportunity for growth is ripe, right now there are really only two ways to get an early piece of the Uruguay cannabis market.
The first is to simply be well connected to the insiders who are now doing multiple private deals with accredited investors to help lay the groundwork for what could be a very lucrative industry.
The second, of course, is to find a way to buy shares of a public company operating in that region.
Now, at the moment, there’s only one. But it is a major player.
The company is called International Cannabis Corporation (TSX-V: ICC), and it’s one of only two companies currently licensed to produce and sell cannabis in Uruguay.
Right now, ICC is sitting on 100kg of product, already produced, packed, and stored, ready for distribution once given the go-ahead by the government.
That being said, it’s targeting two tons by the end of 2017, which, by the way, is nothing compared to the 26.5 tons the government has estimated will be needed to meet demand.
The way it works is that the Uruguayan government — through the Institute for Regulation and Control of Cannabis (IRCCA) — is the off-taker, who will pay ICC $0.90 per gram within 45 days of delivery for the first year, then adjustable yearly thereafter.
So basically, ICC is one of two legal producers in Uruguay that is selling its crop to the government, which has announced it will need about 20 additional tons to meet 2017 demand. I like those odds.
Of course, ICC doesn’t come without risks, which include:
Another delay in the rollout for pharmacies
Less enthusiastic demand than predicted
Changes in policy (doubtful, but always possible)
Early investors unloading large positions at once
Still, this early in the game, ICC is definitely a cannabis company to keep your eye on as we head into 2017.
Or, if you prefer to bypass the public market altogether, you can always go straight for the private deals that I share with members of my Green Chip Stocks community every single month.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially-responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.